Published 9 July 2010
The Securities Commission has laid criminal charges and also issued civil proceedings against Dominion Finance Group Ltd & North South Finance Ltd directors Vance Arkinstall, Rick Bettle, Terry & Ann Butler, Paul Forsyth & Barry Whale.
Commission chairman Jane Diplock said on Wednesday: “These proceedings follow extensive investigations by the commission since Dominion Finance Group went into receivership on 9 September 2008 owing $176.9 million to some 5900 investors. According to the receivers, it is likely that secured debentureholders will receive less than 25% of their investment back. Unsecured creditors are likely to receive no return.
"The commission alleges that Dominion Finance Group’s offer documents & advertisements misled investors by misrepresenting the investment risks, especially in relation to related-party transactions, lending standards, loan quality & impairment, liquidity and the company’s overall financial position.
"The commission also alleges that North South Finance’s offer documents & advertisements misled investors in relation to related- party transactions, liquidity & the company’s overall financial position."
The commission alleges that the directors made false statements in the Dominion Finance Group registered prospectus dated 13 September 2007, as amended by an extension certificate 20 December 2007, and the North South Finance registered prospectus dated 11 September 2007, as amended by an extension certificate 20 December 2007.
Each extension certificate said the relevant company’s financial position had not materially & adversely changed since the company’s previous balance date and that the prospectus was not misleading by failing to properly refer to adverse circumstances. However, the commission alleges this was false and that the directors’ statements misled investors.
In addition, the commission alleges that a Dominion Finance Group quarterly newsletter and a letter to the investors of both companies distributed during 2008 contained similar untrue statements about the financial position of the companies.
The criminal charges laid under section 58 of the Securities Act carry a maximum penalty of 5 years’ jail or fines of up to $300,000. They were laid in the Auckland District Court on 4 June.
The commission has applied for declarations of civil liability & civil pecuniary penalty orders of up to $500,000 against each of the directors. Under the Securities Act, these applications must be made together.
Ms Diplock said the commission’s main purpose in making these applications was to take the first step towards compensation for investors who invested under the September 2007 prospectuses, as amended by the extension certificates on 20 December 2007. “A declaration of civil liability is conclusive evidence that can be relied upon by either the commission or investors themselves in any subsequent claims against the directors for compensation. The commission will consider pursuing compensation claims in due course, should it be in the public interest to do so.
“Investors can take their own civil compensation proceedings, whether or not the commission also does.”
The civil proceedings were issued under section 55C & related sections of the Securities Act and were filed on 3 June in the Auckland High Court.
Ms Diplock said the commission was continuing its investigations in relation to Dominion Finance, North South & their parent company, Dominion Finance Holdings Ltd (& their directors) and was considering further proceedings.
1 December 2008: North South Finance moratorium approved
17 October 2008: Dominion Finance appoints administrators
7 May 2007: North South boosts Dominion Finance result
21 February 2006: